Golden Sands

The Saudi Arabian IT market continues to go from strength to strength as demand soars. Local channel players are stepping up to the challenge.

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By  Stuart Wilson Published  May 1, 2006

Market momentum|~|gksaaim200.jpg|~|Bassam S. Abu Baker, AIM|~|More than 100,000 visitors descended on the Riyadh Exhibition Centre for Gitex Saudi Arabia, underlining the massive potential for growth that exists in the fast-growing IT sector. Vendors, distributors and resellers were out in force at the show explaining the secrets of success in KSA. This year’s Gitex Saudi Arabia demonstrated the wave of optimism sweeping through the Kingdom’s channel as IT spending continues to grow at a rapid rate. Apart from a severe sandstorm on the second day of the event, which led to the evacuation of some halls and caused one outside stand to collapse, Gitex Saudi Arabia was buzzing. If proof was ever needed that in-country distributors operating in the Kingdom are now capable of providing services on a par with regional players, it was here by the bucket load. Companies such as MSO, Nasco, BDL, AIM and Al Jammaz are driving the in-country channel towards the next level of sophistication within the Kingdom. Representing a number of A-brand vendors — and in most cases looking to add even more — the distribution giants of the Kingdom presented a professional face at this year’s Gitex Saudi Arabia. These were not stands that only showcased the latest whizzy products; these were stands where resellers could find out more about RMA, stock availability, credit terms, delivery times and stocking points. Bassam S. Abu Baker, group general manager at Saudi distribution giant AIM, said: “The Saudi market is expanding and demand is high. In the consumer space, sales of notebooks and digital devices are soaring. We have new vendors coming on board and as we move towards a wider product portfolio we will be increasing the levels of value that we deliver to resellers.” AIM, part of Saudi IT conglomerate NTG, has impressive growth plans across all aspects of it business. According to Baker, AIM now has active credit lines with some 350 resellers in the Kingdom. “Our Easy Finance operation means that we are able to provide extended credit lines to resellers dealing with large accounts,” he added. ||**||Vendor presence|~|gksamso200.jpg|~|Agnello Fernandes, MSO|~|Agnello Fernandes, general manager at distributor MSO, said: “The market in Saudi Arabia is very strong at the moment. We have grown 32% year-on-year in the first quarter of 2006. This year we are showcasing products from vendors that were recently added to our portfolio such as MGE and D-Link. We are also about to sign an official distribution agreement with peripheral vendor Cellink, which is based in the Benelux.” With a stocking point in Riyadh offering next day delivery across the Kingdom, MSO is one of several major in-country distributors focusing its business development activities on building reseller breadth and chasing deals that offer a decent margin. “Our strength is reseller breadth,” commented Fernandes. “I don’t focus on the large deals — there is a high credit risk, no margin and it uses up your credit facility with the vendor. We prefer dealing with the smaller resellers to ensure daily run rate business and solid margins.” According to Fernandes, the flow of re-exported product from channel players ostensibly working in the UAE channel continues to impact the development of the Kingdom’s channel but change is now starting to occur. “Vendors such as Microsoft and Symantec are doing a good job stopping the flow of grey product from Dubai,” he said. “Eventually it will stop but it is still there at the moment.” Vendor representatives were also present on the vast majority of distributor stands to explain the benefits of their respective channel programmes to interested resellers. It shows just how far channel development has come in Saudi Arabia. For resellers, it is no longer simply about product price and availability. Admittedly, these are still significant drivers in the decision-making process when it comes to selecting a supplier, but many other factors are also now taken into consideration by the in-country reseller community. While the leading lights of the Saudi Arabian IT distribution and retail channels were out in force at this year’s show, some major vendors were conspicuous only by their absence. Acer once again underlined its commitment to the Kingdom as one of the only A-brand vendors running its own stand at the show. Krishna Murthy, general manager at Acer Middle East explained exactly why the vendor remains so committed to appearing at Gitex Saudi Arabia. “There is so much demand in the Saudi market and the opportunity for sustained sales growth is still there,” he said. “Acer is working hard to move into new product areas that we are not yet addressing fully in the Kingdom. This is the third year that we have had a stand and we thoroughly enjoy participating. Acer wants to replicate what it does at Gitex Dubai at Gitex Saudi.” ||**||Saudi investment|~|gksaacer200.jpg|~|Krishna Murthy, Acer|~|Having just signed a manufacturing agreement with AEC in Saudi Arabia, Acer is also confident that it will be able to make inroads into government-led PCs for homes initiatives in the Kingdom. Other vendors such as Cisco, Sun, Toshiba, Dell and HP harnessed the power of their partners to make sure that their portfolio and partner offerings were prominently displayed at the show. Chris Cornelius, managing director at Sun Middle East, said: “Gitex Saudi remains a vital event and this is why Sun is here exhibiting. In the last year, the Saudi market has contributed more than half of Sun’s revenues in the Middle East and North Africa region.” “We are here alongside our partners and the channel remains vitally important to us. We have appointed Peter Kwisthout as alliances manager in the region to drive our go-to-market strategy alongside key vendor partners such as Oracle and AMD. I know that I will never have enough staff within Sun to address all the opportunities in the Kingdom and that is why it is so important that we scale up our resources through partners,” he continued. Tech Access, a channel development partner for Sun in Saudi Arabia, also had a strong showing during Gitex. Kamran Hussain, vice president sales and marketing at Tech Access, said: “This event is extremely important for Tech Access and our appearance underlines our commitment to the Kingdom. We have just opened an office in Riyadh and we are looking longer term at the potential for locating a proof-of-concept centre in either Riyadh or Jeddah.” “More and more verticals are opening up in the Kingdom. The oil and gas sector remains a valuable area but we are also starting to see strong demand in financial services, healthcare, government and even transport,” he added. ||**||Channel development|~|gksaopen200.jpg|~|Muhammad Jameel bin Ahmed Mulla, Saudi Arabia Minister of Communications and IT, opens Gitex Saudi Arabia 2006 |~|One notable absentee at this year’s Gitex Saudi Arabia was the mighty Microsoft, which quite frankly was bizarre to say the least. After all, this is the most important IT trade show in the largest market in the region where local assemblers such as Zai appear alongside A-brand vendors and 100,000-plus visitors turn up. From the business buyers in the trade hall through to the hordes of consumers attending Gitex Shopper, the event appeared to be a prime opportunity for Microsoft to hammer home its anti-piracy message in the Kingdom and display its latest product offerings and whip up some brand enthusiasm. Apparently not. Microsoft Arabia, the business unit that represents Microsoft in Saudi Arabia, chose to stay away. It is a bizarre situation to say the least. During the CeBIT trade show held in Hanover, Germany earlier this year, one of the lead companies exhibiting (as part of the delegation from Saudi Arabia) was none other than Microsoft Arabia. Admittedly, Europe has been an important market for some Microsoft partners in the Middle East — as demonstrated by last year’s grey market shenanigans. Nevertheless, it is still hard to fathom exactly how Microsoft Arabia can justify jetting off to CeBIT and not put in an appearance at Gitex Saudi Arabia. During the last two years, the Saudi Arabian IT channel has begun to mature and segment. Many vendors have helped to drive this process by putting staff on the ground to work with the channel and the emergence of a top tier of national distributors has to be welcomed. As the largest IT market in the Middle East, Saudi Arabia deserves to be at the forefront of regional development. With companies such as Cisco committing hundreds of millions of dollars to Saudi Arabia and other vendors ramping up their in-country headcount as quickly as possible, the future looks bright for the Kingdom’s channel. The quality of visitors at this year’s Gitex Saudi Arabia was high according to exhibitors and it is hats off to Riyadh Exhibition Company for putting together such a well-organised show once again. Roll on Gitex Saudi 2007. ||**||

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